SUPPLEMENTARY ACCOUNTING RULES FOR GROUPS

Transcription

1 RFR 1.1 This recommendation constitutes a translation of the Swedish recommendation RFR 1.1. In case of uncertainty, the Swedish version takes precedence. December 2007 SUPPLEMENTARY ACCOUNTING RULES FOR GROUPS

2 Contents Page INTRODUCTION 2 OBJECTIVE 5 SCOPE 5 ADDITIONS TO IFRS/IAS 5 IAS 1 Presentation of Financial Statements 6 IAS 16 Property, Plant and Equipment 6 IAS 19 Employee Benefits 6 IAS 24 Related Party Disclosures 8 IAS 27 Consolidated and Separate Financial Statements 8 IAS 40 Investment Property 9 Other additions 9 EFFECTIVE DATE 9 WITHDRAWAL OF RR 30:06 10 ANNEX 1 COMPARISON WITH RR 30:06 11 ANNEX 2 STANDARDS AND INTERPRETATIONS ADOPTED SINCE PREVIOUS ISSUE OF RR 30:06 12 ANNEX 3 STANDARDS AND INTERPRETATIONS PUBLISHED BUT NOT YET ENDORSED 13

3 INTRODUCTION Under Regulation (EC) No 1606/2002 of 19 July 2002 of the European Parliament and of the Council on the application of international accounting standards, with effect from 1 January 2005 companies whose securities 1) at the balance sheet are admitted to trading on a regulated market 2) in the EU must prepare their consolidated financial statements in conformity with IFRS/IAS standards adopted by the European Commission (the EU). In addition to IFRS/IAS, enterprises whose transferable securities are admitted to trading on a regulated market in Sweden (referred to below as listed legal entities) also, however, have to apply certain provisions of the Annual Accounts Act (see Chapter 7, section 32 of the Annual Accounts Act and Government Bill 2004/05:24) in preparing consolidated financial statements. These include provisions that regulate when an enterprise is a parent, on obligation and freedom from obligation to prepare consolidated financial statements, on the Directors report, on interim reports and on publication. In addition there are a number of provisions of a formal nature (concerning language and form and on signature) and some requirements for supplementary information for which there is no equivalent in IFRS/IAS. The Swedish Financial Reporting Board (the Board) took over responsibility for standardisation for listed legal entities from the Swedish Financial Accounting Standards Council in April As a consequence, the Board took over responsibility for the updating of recommendations RR 30, RR 31 and RR 32 and for URA 5 7 and To clarify the change in responsibility for standardisation, the Board has decided to change the designation of the recommendations to Recommendations of the Swedish Financial Reporting Board (RFR) and to introduce a new number series. RR 30 is hereafter designated 1) 2) Under the Law on the Time of Application by Certain Companies of the Regulation (EC) No 1606/2002 of the European Parliament and of the Council on the application of international accounting standards (2004:1172), enterprises which have to prepare their consolidated accounts in conformity with IFRS/IAS under Article 4.1 of the Regulation and only have debt instruments admitted to trading on a regulated market do not need to apply the Regulation until the annual financial period starting immediately after 31 December Regulated market is understood as meaning at present OMX Nordic Exchange Stockholm AB and Nordic Growth Market NGM AB. IFRS/IAS is understood in this recommendation to mean International Financial Reporting Standards and International Accounting Standards with associated interpretations from the International Financial Reporting Interpretations Committee and the Standing Interpretations Committee. 2

4 RFR 1 and RR 32 is hereafter designated RFR 2. In addition, the designations of URA 5 and 7 and 42 7 are changed in the version in which they are to apply to enterprises whose transferable securities are admitted to trading on a regulated market in Sweden. The new designation is Statements of the Swedish Financial Reporting Board. This recommendation, RFR 1, contains supplementary standardisation concerning statutory provisions mentioned. Concerning interim financial reporting, see Chapter 9 of the Annual Accounts Act. Concerning publication and signature of the six-monthly report, see Chapter 16 of the Securities Markets Act Relation between RFR 1 and the regulations and general guidelines of the Swedish Financial Services Authority As well as statutory provisions and the Recommendations of the Swedish Financial Reporting Board, the presentation of financial statements for credit institutions, securities companies and insurance companies is affected by regulations and general guidelines from the Swedish Financial Supervisory Authority. In exceptional cases where these indicate different reporting than the Board s recommendations, the regulations and general guidelines of the Swedish Financial Supervisory Authority are to be applied. IFRS/IAS which have not yet been endorsed and IAS standards which have been rejected by the EU The EU has indicated in published comments 1) what is applicable in consolidated accounts when a standard is not adopted. The following are apparent from the comments: If a standard is not endorsed by the EU, it is permitted for a company to apply it in preparing its financial statements further to the IAS Regulation. If a standard which has been rejected or has not yet been endorsed by the EU is not inconsistent with endorsed standards and is consistent with the conditions set out in IAS 8 paragraphs 10 12, it may be used as guidance. To the extent that a standard which has not been yet been endorsed by the EU or which has been rejected by the EU conflicts with a standard which has been endorsed for example where an endorsed standard is amended and consequently comes into 1) Comments concerning certain articles of the Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards and the Fourth Council Directive 78/660/EEC of 25 July 1978 and the Seventh Council Directive 83/349/EEC of 13 June 1983 on accounting. 3

5 conflict with endorsed standards the standard which has not yet been endorsed or has been rejected may not be applied. The enterprise must continue to apply in full the standard endorsed by the EU. The EU clarified at the end of 2005 that in cases where the IASB publishes a new or revised standard before the balance sheet date which has been endorsed by the EU and is not published in the Official Journal until after the balance sheet date, but is published before the financial statements are presented, it may be applied by the enterprise provided that the standard permits application at the balance sheet date. Relation between RFR 1 and standards issued by the IASB RFR 1 is based upon the standards and statements issued by the IASB and IFRIC which have been adopted by the European Commission. As new and revised IFRS/IAS standards are adopted by the EU or Swedish legislation is amended, the Board will assess the need for exceptions and additions to IFRS/IAS and publish new versions of RFR 1. The latest version of RFR 1 can be found on the Board's website, RFR 1 indicates additions to the standards published by the IASB which have an effective date that means that they are to be applied to financial statements relating to periods beginning on or after 1 January Earlier application is encouraged. This recommendation, RFR 1, replaces the previous edition of RR 30:06 (published in December 2006) and is to be applied to annual financial periods beginning on or after 1 January Earlier application is encouraged. More important changes in comparison with the previous edition are commented upon in Annex 1 to the recommendation. 4

6 SUPPLEMENTARY ACCOUNTING RULES FOR GROUPS OBJECTIVE The purpose of this recommendation is to provide guidance concerning disclosure requirements in the Annual Accounts Act which are to be applied together with IFRS/IAS in the preparation of consolidated accounts. SCOPE This recommendation is to be applied in accounting by enterprises whose transferable securities at the balance sheet date are admitted to trading on a regulated market in Sweden (also referred to below as listed legal entities) in the preparation of consolidated accounts. This recommendation is based on the IFRSs, IASs, IFRICs and SICs adopted by the EU at ADDITIONS TO IFRS/IAS It follows from Regulation (EC) No 1606/2002 of 19 July 2002 of the European Parliament and of the Council on the application of international accounting standards that an enterprise whose securities at the balance sheet date are listed on a regulated market in the EU has to prepare consolidated accounts in accordance with the IFRS/IAS standards adopted by the EU. Chapter 7, section 32 of the Annual Accounts Act (1995:1554) and Government Bill 2004/05:24 state that such an enterprise also has to apply certain provisions of the aforementioned Act. An enterprise therefore has to apply the additions to IFRS/IAS below. Regarding the provisions on the Directors' report, reference should be made to Chapter 7 of the Annual Accounts Act, on publication to Chapter 8 of the Annual Accounts Act, on signature and certification to Chapter 16 of the Securities Markets Act and on appeal to Chapter 10 of the Annual Accounts Act

7 Addition to IAS 1 Presentation of Financial Statements Under Chapter 7, section 32 of the Annual Accounts Act, with reference to Chapter 5, section 14 of the Annual Accounts Act an enterprise has to present a specification of changes in equity during the period in the balance sheet or in notes to it. In the view of the Board this requirement is met if reference is made to the financial report indicated in IAS 1 paragraph 8 (c) (i). Addition to IAS 16 Property, Plant and Equipment Under Chapter 7, section 32 of the Annual Accounts Act, with reference to Chapter 5, section 14 of the Annual Accounts Act, an enterprise has to provide information on taxable value for properties which are fixed assets, allocated across the balance sheet items and in such notes as are specified in Chapter 3, section 4, fourth paragraph of the Annual Accounts Act. Taxable values are not always comparable in different countries. In those cases where a group contains subsidiaries outside Sweden, the information on taxable value should therefore be limited to relating only to the Swedish part of the group, with an indication of equivalent carrying amounts. Addition to IAS 19 Employee Benefits An enterprise has to provide the following information for each annual financial period under the Chapter 7, section 32 of the Annual Accounts Act: a) The average number of employees during the annual financial period with information on the gender breakdown. If the enterprise has employees in more than one country, the average number of employees and the gender breakdown in each country is to be stated. See Chapter 5, section 18 of the Annual Accounts Act. b) The gender breakdown among the members of the board of directors, the managing director and other persons in the management of the enterprise. The gender breakdown among members of the board of directors and among other executive employees is to be reported individually. The information provided is to pertain to the situation prevailing on the balance sheet date. See Chapter 5, section 18 b of the Annual Accounts Act

8 c) The combined sum of the salaries and other compensation paid for the annual financial period to members of the board of directors, the managing director and equivalent executive employees as well as former members of the board of directors and the former managing director. Bonus payments and equivalent compensation are to be specified separately. All persons in the company management are to belong to the group for which the company has to disclose the aggregate amount of salaries and other compensation for the annual financial period. The number of persons in this group is to be specified. In addition, information is to be provided on salaries and other compensation for the annual financial period at individual level for each of the members of the board of directors and for the managing director and, where appropriate, former such executive employees. Deputy members of the board of directors are placed on a par with members of the board of directors and a deputy managing director is placed on a par with the managing director. An exception applies, however, in respect of employee representatives. See Chapter 5, sections 20, 23 and 24 of the Annual Accounts Act. d) The aggregate sums of costs and obligations which relate to pensions or similar benefits to members of the board of directors, the managing director or equivalent executive employees as well as former members of the board of directors and the former managing director. All persons in the company s management are to belong to the group for which the company has to disclose the aggregate sum of costs and obligations pertaining to pensions or similar benefits for the annual financial period. The number of persons in this group is to be specified. In addition, information is to be provided on costs and obligations for the annual financial period at individual level for each of the members of the board of directors and for the managing director and, where appropriate, former such executive employees. Deputy members of the board of directors are placed on a par with members of the board of directors and a deputy managing director is placed on a par with the managing director. An exception applies, however, in respect of employee representatives. See Chapter 5, sections 22, 23 and 24 of the Annual Accounts Act. e) If the enterprise has entered into agreements on severance pay or similar benefits for members of the board of directors, the managing director or other persons in the management of the enterprise, information is to be provided on the agreements and on the substantive conditions in the agreements. See Chapter 7, section 32 of the Annual Accounts Act, with reference to Chapter 5, section 25 of the Annual Reports Act. 7

9 Addition to IAS 24 Related Party Disclosures Under Chapter 5, section 12 of the Annual Accounts Act, an enterprise is to provide information on loans, pledged assets and other security as well as contingent liabilities entered into for the benefit of a member of the board of directors, managing director or equivalent executive employee of the company or of another group enterprise. 1) The information is to contain :2) The size of loans made. Principal terms of loan. Interest rates. Sums repaid during the annual financial period. The nature of pledged assets and contingent liabilities entered into. The sum of the loans for which assets have been pledged. The borrower s connection to the company. Addition to IAS 27 Consolidated and Separate Financial Statements If different measurement principles are applied in the consolidated accounts and in the annual accounts, under Chapter 7, section 12, first paragraph of the Annual Accounts Act information on this is to be provided in a note with an indication of the reasons for the deviation ) 2) Chapter 21, sections 1 6 of the Annual Accounts Act prohibits limited companies from making loans and pledging security for loans to, among others, a member of the board of directors or managing director of the enterprise or another enterprise in the same group. Under Chapter 21, sections 8 9 of the Annual Accounts Act such loans may, however, be made or security pledged under certain circumstances after permission has been obtained. Such loans are to be disclosed in the balance sheet under Annex 1 to the Annual Accounts Act. Information is also to be provided for such loans as have been made to members of the board of directors and managing directors before they took up their current positions in the enterprise. In credit institutions and securities companies, under Chapter 5, section 2 of the Annual Accounts Act for Credit Institutions and Securities Companies information on principal terms of loan, interest rates and sums repaid during the annual financial period may be omitted. 8

10 The issue of whether an enterprise is obliged to prepare consolidated accounts or not is to be settled by applying the provisions of the Annual Accounts Act (i.e. the definition of group in Chapter 4 and the rules on obligation or exemption from obligation to prepare consolidated accounts in Chapter 7, sections 1 3). When it has been clarified that an enterprise, according to these provisions, is to be regarded as a parent and obliged to prepare consolidated accounts, the issue arises of which enterprises are to be covered by the consolidated accounts. The rules contained in IAS 27 are to be applied in this evaluation. Addition to IAS 40 Investment Property In addition to the information which is to be provided in accordance with IAS 40, an enterprise is to provide information on taxable values for investment properties under Chapter 7, section 32 of the Annual Reports Act concerning properties which are fixed assets, broken down into the items in the balance sheet and in such notes as are referred to in Chapter 3, section 4, fourth paragraph, sub-paragraph 2 of the same Act. Taxable values are not always comparable in different countries. In those cases where a group includes subsidiaries outside Sweden, the information on taxable value should therefore be limited to relating only to the Swedish part of the group, with an indication of equivalent carrying amounts. Other additions In addition to what follows from IFRS/IAS, a limited company under Chapter 7, section 32 of the Annual Accounts Act, with reference to Chapter 5, section 21 of the Annual Accounts Act is to provide information on the total compensation for the annual financial period paid to each of the company's auditors and the audit firms where the auditors work. Separate information is to be provided on how large a portion of the compensation pertains to engagements other than the audit engagement. EFFECTIVE DATE RFR 1 is to be applied in the presentation of financial statements that relate to annual financial periods beginning on or after 1 January Earlier application is encouraged

11 WITHDRAWAL OF RR 30:06 This recommendation supersedes the previous recommendation RR 30:06, published in December 2006, with regard to annual financial periods beginning on or after 1 January

12 ANNEX 1 COMPARISON WITH RR 30:06 The previous edition of the recommendation was published in December 2006 and became effective on 1 January It is referred to hereafter as RR 30:06. The new version, RFR 1 becomes effective on 1 January Earlier application is encouraged. The new standards and interpretations which have been adopted since the most recent version of RR 30:06 and have thus affected RFR 1 have not resulted in any new additions or exceptions in the recommendation, and previous rules apply. 11

13 ANNEX 2 STANDARDS AND INTERPRETATIONS ADOPTED SINCE PUBLICATION OF RR 30:06 The following new standards and interpretations have been adopted by the EU since the more recent edition of RR 30:06 was published in December 2006: a) IFRS 8 Operating Segments b) IFRIC 10 Interim Financial Reporting and Impairment c) IFRIC 11 IFRS 2 Group and Treasury Share Transactions 12

14 ANNEX 3 STANDARDS AND INTERPRETATIONS PUBLISHED BUT NOT YET ENDORSED The following proposals for amendments to standards and new interpretations have been published but have not been adopted by the EU at the time of publication of RFR 1 a) IAS 1 Presentation of Financial Statements b) IAS 23 Borrowing Costs (Revised 2007) c) IFRIC 12 Service Concession Arrangements. d) IFRIC 13 Customer Loyalty Programmes. e) IFRIC 14 IAS 19 The Limit on a Defined Benefit Asset, Minimum Funding and their Interaction 13

15 Copyright Rådet för finansiell rapportering 2007 (Swedish Financial Reporting Board 2007) The contents of this publication are protected under the Act on Copyright in Literary and Artistic Works. Reproduction, in whole or in part, without the permission of the Swedish Financial Reporting Board is prohibited. Rådet för finansiell rapportering (Swedish Financial Reporting Board) Box 7680 SE Stockholm Sweden Telephone: +46 (0) Fax: +46 (0)